The US Federal Reserve is expected to raise rates by a further quarter point when the Open Markets Committee meets today.
However, poor jobs figures last Friday and continuing worries about high oil prices, are raising doubts about Federal Reserve chairman Mr Alan Greenspan's longer-term assessment of the US economy.
The Fed raised rates for the first time in four years at the end of June and signalled the quarter percentage-point hike to 1.25 per cent would be the start of a "measured" campaign to return borrowing costs to more normal levels.
The futures market is pricing in only a 50 per cent chance that it will sanction another rate increase at its September policy meeting (which will take place more than two weeks after the August jobs report is released).
Analysts remain confident that the Fed will raise rates to 1.5 per cent today - in part due to the belief that it would send the markets into shock if interest rates remained on hold.
Mr Anthony Karydakis, a Chicago-based economist, said the Fed has spent too many years convincing financial markets not to pay too much attention to any one indicator to risk that credibility by suspending the rate-raising campaign.
Mr Bob Dederick, principal of RGD Economics in Chicago, said a pause would be seen as an admission that the Fed was wrong in its assessment earlier this year that inflation was building in the economy.
Instead, he said, the Fed and financial markets will raise rates tomorrow and then watch the stream of incoming data intently in coming months before deciding what to do next.
Analysts said the dollar is now vulnerable to any clues in the Fed statement that the rate hiking cycle may pause for a time.
"Anything [in the statement\] that is going to leave the slightest hint of steady rates going into the fourth quarter of the year could lead to a messy dollar sell-off," according to Mr David Leaver, senior trader with Gain Capital .
It is not just the sluggish jobs market that has market observers worried.
Soaring oil prices are also weighing on strategists' minds.
